Mind the gap

Haas has fared better than other recent Formula 1 newcomers, but do its performances deter or encourage would-be entrants?

Haas took eighth place in the championship for constructors in 2017, just as it did in its inaugural F1 season 12 months beforehand. It was within 10 points of Renault’s sixth place and ahead of McLaren and Sauber. Its drivers Romain Grosjean and Kevin Magnussen scored points 13 times between them, with a best finish of sixth (Grosjean in Austria). This was all within the context of running on the lowest budget in the field (about £80 million), courtesy of being the only team operating within the ‘listed parts’ template. Since 2015, a relaxation of the rules has essentially allowed a team to compete without making its own car – so long as that car has none of a number of specified crucial parts manufactured by another team. So Haas races a car conceived in the Ferrari wind tunnel, using Ferrari running gear, built by Dallara and operated out of a race shop in Banbury.

This structure allows the team to number no more than 120 people, which is actually about 80 fewer than even Manor used to employ to campaign a car that had no hope of transcending its tail-end status as it attempted to race according to the template of the old regulations – with its own car concept and production department.

So there can be little argument that the listed-parts concept is a more effective way to compete in the midfield, with a reasonable expectation of a good points haul over a season. So is this the blueprint for new entrants into F1? Perhaps, but there are many very specific reasons it has worked as well as it has for Haas. Both the specialisation and success of Gene Haas’ machine tool business has made him extremely well placed – maybe even uniquely so – to maximise the opportunity offered by the listed-parts F1 concept.

Haas, from Ohio, founded his machine tools business in 1983, and its vast success allowed him, a couple of decades later, to buy a NASCAR team, combining his passion for racing with a promotion medium for the business. There were also many obvious synergies and Haas Automation came to supply racing teams and manufacturers in many categories with machine tools, particularly with the advent of CNC technology. Haas supplies Scuderia Ferrari, among others.

It was Günther Steiner – working within the NASCAR scene, but with previous F1 experience at Jaguar and Red Bull – who persuaded Haas of F1’s merits. This was during the time that F1 was flirting with the concept of privateer teams – independents who would buy cars from established teams such as McLaren – an idea that was eventually scuppered, amid concerns from the likes of Williams and Force India that it could put them out of business. That was then modified to the listed-parts concept, whereby an independent team would still have to supply its own monocoque, survival cell, front-impact structures, roll-over structures, bodywork, wings, floor and diffuser – but there was nothing to say these parts could not be supplied by someone else, so long as that was not an existing F1 team.

With Haas’s business already enjoying a relationship with Ferrari, and the world’s biggest racing car producer, Dallara, also in Italy, Haas and Steiner saw how this could work. Gene provided the financial muscle and structure (plus some of the facilities already in existence for his NASCAR team). He’d be guided by Steiner, who would organise it all and use his F1 contacts to recruit and liaise.

Using Ferrari running gear, piggy-backing Dallara’s production and design facilities, combined with Ferrari’s wind tunnel (and a team of ex-Ferrari aerodynamicists assigned to the programme) there was a much greater chance of producing a respectably competitive car than could ever hope to have been achieved by recent ‘budget’ F1 teams such as Manor, Caterham and HRT. So it proved – with Grosjean’s fairytale sixth place on the team’s debut in Australia 2016.

Gene Haas’s empire was perfectly scaled and positioned to pull this off. He was wealthy enough to get it off the ground – and with a business justification behind it. As he said at the F1 project’s launch: “Just the association with being in F1 basically takes a brand from nobody to the stratosphere. If I can achieve an extra billion in sales, I can pay for whatever F1 costs.” It remains to be seen if he’ll be proved right on that. For although the costs are lower doing it this way, so is the income.

Taking a short-term view, he now admits he’d have been better off taking Bernie Ecclestone’s advice and buying an existing team. “Bernie was always saying ‘why don’t you just buy an existing team?’ – that was actually a better idea, because there were only 10 teams at the time so economically it would’ve been a lot more beneficial. Bernie was probably right because there are so many advantages when you’re a top-10 team.”

NUMBER CRUNCH

To illustrate what he means, we can take a look at some order-of-magnitude numbers, using three independent teams, Haas, Williams and Force India. These represent three distinct F1 team models. Williams is a self-contained entity with the facilities to design and produce almost everything in-house, including its own gearbox, and employs more than 600 people. Force India has its own wind tunnel but contracts out a lot of components to suppliers, buys in a gearbox from Mercedes and employs about 360 people. Haas makes almost nothing, hires its design and production from Dallara and employs about 120. But Williams and Force India, as established F1 teams, have an ongoing share of F1’s ‘Column 1’ revenues as well as the results-based ‘Column 2’ payments. A new team does not receive Column 1 payments until it has finished in the top 10 of the constructors championship in at least two of three consecutive seasons. So in the first two years of Haas F1’s existence, the comparison would have looked something like this:

2016 & 17

WILLIAMS
Spent £150,000,000
Received £52,000,000
Deficit £98,000,000

FORCE INDIA
Spent £90,000,000
Received £54,000,000
Deficit £36,000,000

HAAS
Spent £80,000,000
Received £14,000,000
Deficit £66,000,000

As can be seen, the absence of Column 1 revenues for Haas will have made it a more expensive operation to sustain than Force India, despite substantially operating lower costs (though still cheaper than Williams).

However, with two consecutive eighth place finishes in the championship, for 2018 Haas will be eligible for those coveted Column 1 payments (assuming it has a commercial agreement with Liberty). These payments are divided up equally between the 10 qualifying teams, with the results-based Column 2 added on. As such, the projected 2018 numbers using the same on-track results might look more like this: (NB: in addition, Williams receives ‘heritage’ payments.)

2018

WILLIAMS
Spend £150,000,000
Received £49,000,000
Deficit £101,000,000 

FORCE INDIA
Spend £90,000,000
Received £51,000,000
Deficit £39,000,000

HAAS
Spend £80,000,000
Received £38,000,000
Deficit £42,000,000

So it has taken someone of Gene Haas’ financial clout to suffer the initially heavier costs of establishing a new team – even a listed-parts one – over those of buying an existing small team (Force India and Toro Rosso are both believed to be for sale). Only his heavy investment has made it possible for the team to perform well enough over two seasons for it to be able to reduce the financial load to around that of an existing small independent team. Trying to replicate that would be a big risk for any would-be new team owner to take.

Furthermore, how many would-be new team owners would be already placed in a business that could really make the synergies with F1 work? Haas Automation was already doing business with F1 teams, selling them very expensive production machinery, and continues to do so. He already had a racing empire in a different category and must count himself as fortunate that there was a ready race shop with the facilities needed (being sold by the Manor team administrators).

It has worked for Haas thus far in that the team is now established as a very respectable mid-grid operation that can go wheel-to-wheel with other independents – and any under-performing works operations. But there are inherent limitations in transcending that level to become serious contenders for regular podiums or race wins – and Gene Haas has already posed the question: “If we cannot win in future, why are we in it?” (That was said in the context of his views on a possible future regulation cost cap).

RULED OUT?

The way the F1 technical regulations are so tightly defined and prescriptive now means there’s virtually zero prospect of a small team coming up with a revolutionary technical innovation that will allow it to punch above its financial weight. Instead, the last few tenths of lap time now come from optimisation, of multiple iterations of the same processes, refining and refining and with ever more sophisticated simulation tools. Which all takes budget. Then there is consistency of performance: that takes money too, and it’s notable that in 2017 the Haas VF-17 could sometimes work very well (Grosjean twice qualified best-of-the-rest after the big three teams), but also it would sometimes be unable even to graduate from the Q1 part of qualifying. But even working very well in this context means that as best after the big three, you will still be more than 1sec per lap off the ultimate pace. There’s no making that up on a budget.

Giving some insight into the limitations in the field is the team’s chief race engineer Ayao Komatsu. “Our aero team was so small, so we couldn’t cover a wide efficiency range when the car was configured. So we just had to pick a range where we could optimise, which was in the middle. So it meant that at high-downforce tracks like Budapest and Singapore we were nowhere and at low-downforce tracks like Baku we really struggled. But if we could get everything working together well at those middle tracks, we had a chance of doing okay.”

If a midfield team has any aspirations of one day developing into regular winners and title contenders – as Red Bull did, as Williams says it has – then it can’t be done on the Haas template. But that’s with the F1 regulations as they are. If Liberty can ever succeed in imposing a serious cost cap, things might change. This is what Haas himself seems to be hoping for. Speaking to NBC at Monza this year, he commented: “If anything, my point of view is that it’s a gap we can’t reduce. With what our current resources are and what we know, it seems impossible.

“I think some of it is that the top three teams are quasi-manufacturers, and since they run the whole car and make the whole car, they understand it a lot better. So we’re always going to be at something of a disadvantage to the manufacturers who understand the car better than we do.

“But I think there needs to be some kind of a randomness in the sport, where even a team at the back has some possibility of winning once in a while. Not every race, but if you can never win in this sport, it’s really not going to be much of a sport.

“I think every team should have at least some possibility of winning a race once in a while, through a fuel strategy or some alternative. But the gap’s so big now that I just don’t see how we can possibly close it.”